Covered call ETFs have quickly grown in popularity as investors search for ways to boost yield in uncertain markets.
These funds package options strategies into the exchange-traded fund (ETF) format, giving everyday investors access to a tactic once reserved for more advanced traders.
The rise in covered call ETFs became especially noticeable after the 2022 bear market, when these funds outperformed broader equity benchmarks due to their ability to capitalize on elevated market volatility.
Investors were drawn to their high-income potential, often yielding far more than traditional dividend ETFs.
But this isn’t a free lunch. Like most derivatives-based strategies, covered call ETFs come with trade-offs and added complexity.
They can cap upside potential, behave differently in various market environments, and aren't always easy to compare due to differences in how they implement their strategy.
That’s why it’s important to understand how they work and whether they fit your portfolio before investing.
Seven best covered call ETFs in 2025
Covered call ETFs have exploded in popularity thanks to their high yields and defensive appeal. But not all funds in this category are built the same. In this section, we’ll go over seven of the best covered call ETFs for 2025.
Some follow strict indexes, while others are actively managed. Some prioritize income above all else, while others try to strike a better balance between yield and growth.
For each one, we’ll look at how it performed historically, its yield (either on a forward, 12-month trailing, or 30-day SEC basis), its expense ratio, whether it’s active or index-based, and the reason it’s worth considering.
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Should you buy a covered call ETF?
Covered call ETFs are not beginner funds. They’re built using options strategies that come with trade-offs, and their best use cases fall into two specific categories.
The first is for older investors who are in the decumulation phase, meaning they’re using their portfolios to generate income for living expenses.
In this context, covered call ETFs can provide steady monthly distributions, which makes them attractive when held in a tax-sheltered account like a Roth IRA. There, the income is tax-free and can be withdrawn without penalty.
The second use case is for tactical investors who expect a rangebound, high-volatility market. In that environment, stocks don’t break out significantly but bounce around, which is ideal for covered call strategies.
These ETFs can outperform broad market funds in that specific setup by repeatedly collecting premiums without giving up large upside moves because there aren’t any.
However, outside of those two scenarios, most covered call ETFs will underperform traditional index ETFs. That’s because the upside is capped by the very nature of the strategy, and the tax drag is significant, especially in taxable accounts.
Ultimately, total return is what matters. Chasing high headline yields without understanding the risks behind them can lead to subpar long-term results. If you’re not using them for income or in the right market environment, covered call ETFs might be more of a drag than a boost.
